Correlation Between ProShares Trust and Invesco DWA

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Can any of the company-specific risk be diversified away by investing in both ProShares Trust and Invesco DWA at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining ProShares Trust and Invesco DWA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares Trust and Invesco DWA Energy, you can compare the effects of market volatilities on ProShares Trust and Invesco DWA and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in ProShares Trust with a short position of Invesco DWA. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Trust and Invesco DWA.

Diversification Opportunities for ProShares Trust and Invesco DWA

0.03
  Correlation Coefficient

Significant diversification

The 3 months correlation between ProShares and Invesco is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Trust and Invesco DWA Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Energy and ProShares Trust is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on ProShares Trust are associated (or correlated) with Invesco DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Energy has no effect on the direction of ProShares Trust i.e., ProShares Trust and Invesco DWA go up and down completely randomly.

Pair Corralation between ProShares Trust and Invesco DWA

Given the investment horizon of 90 days ProShares Trust is expected to under-perform the Invesco DWA. In addition to that, ProShares Trust is 2.15 times more volatile than Invesco DWA Energy. It trades about -0.09 of its total potential returns per unit of risk. Invesco DWA Energy is currently generating about 0.01 per unit of volatility. If you would invest  4,393  in Invesco DWA Energy on November 2, 2024 and sell it today you would earn a total of  196.00  from holding Invesco DWA Energy or generate 4.46% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

ProShares Trust   vs.  Invesco DWA Energy

 Performance 
       Timeline  
ProShares Trust 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days ProShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The recent confusion may also be a sign of long-lasting up-swing for the Etf traders.
Invesco DWA Energy 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DWA Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Invesco DWA is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

ProShares Trust and Invesco DWA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ProShares Trust and Invesco DWA

The main advantage of trading using opposite ProShares Trust and Invesco DWA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Trust position performs unexpectedly, Invesco DWA can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Invesco DWA will offset losses from the drop in Invesco DWA's long position.
The idea behind ProShares Trust and Invesco DWA Energy pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.

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